System and Method for Settling Trades

ABSTRACT

A method of settling trades includes the steps of obtaining an authenticated delivery instrument, wherein the authenticated delivery instrument is authenticated by a first exchange and may be used to settle a trade undertaken on the first exchange. An electronic proxy is issued for the delivery instrument, wherein the electronic proxy may be exchanged for the authenticated delivery instrument and where the electronic proxy is used to settle a trade undertaken on a second exchange.

REFERENCE TO RELATED APPLICATIONS

This application is a continuation under 37 C.F.R. §1.53(b) of U.S.patent application Ser. No. 12/755,634, filed Apr. 7, 2010, which is acontinuation of U.S. patent application Ser. No. 11/879,185, filed Jul.16, 2007, which is incorporated by reference.

FIELD OF THE INVENTION

The present invention relates generally to authenticated deliveryinstruments and more particularly to a system and method that enablestraders to settle trades using an electronic proxy for delivery.

BACKGROUND

Exchanges enable buyers and sellers to trade financial instruments suchas stocks, bonds, options, cash, agricultural products, commodities, andfutures, etc. A futures contract is a financial instrument thatrepresents a potential legal obligation for delivery or acceptance ofanother financial instrument or an underlying commodity at a specifiedtime in the future. The financial instrument that underlies a futurescontract may include a quantity of grains, metals, oils, bonds,securities, or cash. The exchange establishes a futures contractspecification that defines at least the underlying product, a quantityof the underlying product represented by one futures contract, and acontract month (the month in which the delivery may take place). Thespecification defines the expiry month for a futures contract in termsof a month and a year and the futures contract may not be traded after apredetermined day of the defined month and year. The potential legalobligation represented by the futures contract to deliver the underlyingproduct becomes a real legal obligation for the seller of the futurescontract when the futures contract expires. Similarly, the potentiallegal obligation represented by the futures contract to accept deliveryof the underlying product becomes a real legal obligation when theseller of the futures contract declares an intention to deliver.Additionally, exchanges facilitate buying and selling of other types ofcontracts including cash contracts and cash forward contracts, which mayinvolve delivery of a commodity in the future.

A futures contract may be traded in a physical exchange where buyers andsellers meet. A buyer and a seller use an open outcry auction processamong other buyers and sellers to negotiate a price at which to buy andsell, respectively, a quantity of the futures contracts. After the buyerand seller agree upon the quantity and the price, the buyer and theseller each report his/her portion of the trade to the exchange. Theinformation reported by the buyer comprises identification informationabout the buyer, who the buyer believes is the seller, the quantity thebuyer believes has been purchased, and the price to be paid thereby.Similarly, the seller reports information comprising identificationinformation thereof, who the seller believes is the buyer, and thequantity the seller believes has been sold and the price to be receivedthereby. In some cases, the exchange encodes and transmits to aclearinghouse the information reported by the buyer and the sellerseparately as two sets of trade data. Alternately, the exchange createsand transmits to the clearinghouse matched trade data that comprises theinformation reported by both the buyer and the seller.

A futures contract may also be traded in an electronic exchange where atrader submits an order to a trading host. The order is either a bid oran offer that indicates a desire to purchase or sell, respectively, thefutures contract. The order identifies, at least, the futures contract,the quantity of the futures contract the trader wishes to buy or sell,the price at which the trader wishes to buy or sell the futurescontract, and a direction of the order (i.e., whether the order is a bidor an offer). The trading host monitors orders that are received therebyto identify a bid for the futures contract at a particular price with anoffer for the same futures contract at the same or lower price.Similarly, the trading host monitors orders that are received thereby toidentify an offer for the futures contract at a particular price with abid for the same futures contract at the same or higher price. Uponidentification of the bid and the offer, a quantity associated therewithis matched and the quantity, price, and identification informationregarding the buyer and seller are transmitted to the clearinghouse asmatched trade data.

The clearinghouse settles the accounts of the members, clears trades,collects and maintains margin funds, and reports trade data. Eachtrading firm that holds membership in the clearinghouse becomes liableto the clearinghouse for all trades made on the behalf of the tradingfirm or a customer of the trading firm. The trading firm with which thetrader is associated guarantees delivery or receipt obligations of thetrader. Furthermore, the clearinghouse oversees and insures thatobligations made by the trader are carried out in a timely fashion.

At the end of every trading session, the clearinghouse reconcilestrading data received thereby from an exchange and transmits clearedtrade data to a clearing firm associated with each trader. Thereafter,each clearing firm “marks to market” the account of each traderassociated therewith. That is, the clearing firm records the netposition of each trader in accordance with any changes in the prices ofthe futures contracts in which the trader has an open position. Thetrading firm also confirms that the trader has sufficient margin fundson deposit to support the net position thereof.

The specification of a futures contract that requires delivery of anunderlying product defines the characteristics (e.g., grade, purity,weight, etc.) of the underlying product that is to be delivered.Typically, the delivery or acceptance obligations associated with thefutures contract may begin at anytime during the delivery month and mustbe fulfilled within a predetermined number of business days after thelast trading day of the delivery month.

During the expiry month, a trader holding an open long position aparticular futures contract may have to take delivery when the traderholding a short position in that futures contract decides to makedelivery. Furthermore, the specification of the futures contract definesthe last day by which the seller must complete delivery. The clearingfirm representing the seller notifies the clearinghouse that the sellerwants to deliver on a futures contract. The clearinghouse notifies boththe seller and the clearing firm representing the buyer. The clearingfirm representing the seller forwards an invoice to the clearinghouse,which in turn forwards the invoice to clearing firm representing thebuyer. On the day when delivery is to take place, the clearing firmrepresenting the buyer presents a certified check or other paymentinstrument (including electronic transfers of funds) for the amount dueto the clearing firm representing the seller. After the clearing firmrepresenting the seller receives payment for the amount due, theclearing firm representing the seller transfers a paper deliveryinstrument (normally a warehouse receipt or a vault receipt) to theclearing firm representing the buyer.

The paper delivery instrument is issued by a warehouse (if theunderlying product is a grain or other agricultural product) or a vault(if the underlying product is a metal) where the underlying product isstored. The buyer can then present the paper delivery instrument to theissuer (either warehouse or vault) to redeem the underlying product.

The exchange authenticates the paper delivery instrument as representinga quantity of product that meets specification defined by the exchangeand denotes the authentication by marking the paper delivery instrumentwith an indicium corresponding to the exchange. For example, theexchange may specify the weight and fineness of a bar of gold that maybe used to deliver on a contract acquired at the exchange. The paperdelivery instrument bearing the indicium corresponding to the exchangeprovides assurance that the bar of gold meets the standards that theexchange has set forth. Typically, a paper delivery instrument is markedwith an indicium corresponding to a particular exchange. Additionally,some exchanges require that delivery of underlying futures contractstraded at such exchanges must be accomplished using paper deliveryinstruments bearing the indicium corresponding to the exchange.

In some cases, typically involving agricultural products, the exchange,the clearing firms, and the clearinghouse use electronic receiptsinstead of paper receipts to facilitate delivery. Specifically, anelectronic receipt is an entry in a database record associated with aclearing firm that indicates that a trader associated with the clearingfirm owns a quantity of a product. The electronic receipt typicallyincludes information generated by the exchange that indicates that theelectronic receipt is authentic and that the exchange has verified thatthe underlying product meets the specifications set the exchange.

In some instances, the database entry for the electronic receipt isassociated with an account the clearing firm has at a clearinghouse. Inother instances, the database entry is associated with an account at theexchange. Typically, clearing firms maintain records that associate atrader who owns a product and the electronic receipt that represents theproduct. Such records are typically associated with an account thetrader has at the clearing firm and are notations in a database recordcorresponding to the account. In order to deliver a product, the sellerauthorizes the clearing firm associated therewith to transfer anelectronic receipt to an account associated with the buyer. As withpaper receipts, electronic receipts are bearer receipts in that theholder of the electronic receipt may request physical delivery of theproduct represented by the electronic receipt. Typically, the holder ofthe electronic receipt notifies the clearing firm that delivery isdesired, and the clearing firm subsequently notifies the warehouse orvault to provide delivery to the holder. In some cases, the holder ofthe electronic receipt notifies the exchange that delivery is desiredand the exchange notifies the warehouse or vault to provide delivery tothe holder. Upon notification, the warehouse or vault provides theunderlying good to holder and notifies the clearing firm or exchangethat the good has been delivered. Typically, the notifications describedabove are communications that are sent between systems operated byentities (i.e., the clearing firm, the exchange, the clearinghouse, andthe issuer) that participate in the delivery. In some cases, a staffmember at one of the entities may communicate with a staff member atanother entity to facilitate the delivery process. The clearing firm orthe exchange thereafter voids the electronic receipt.

There are risks to both the buyer and seller associated with thehandling and transportation of the paper delivery instrument. The paperdelivery instruments can be lost or damaged and typically, the paperdelivery instruments are bearer instruments so anyone presenting theinstrument can take delivery of the underlying product. In addition, thevault or warehouse may be in a location remote from the exchange and/orthe buyer and, in such cases, the buyer may have to arrange fortransportation of the physical delivery instrument to an agent for thebuyer where the vault or warehouse is located.

Furthermore, if a trader wishes to use a delivery instrumentauthenticated by a first exchange to deliver on trades made at a secondexchange, the second exchange may have to verify that the productrepresented by the delivery instrument at least meets the requirementsfor products specified by the second exchange. In such cases, either thetrader or the second exchange may incur costs and delays associated withthe verification process. The second exchange may undertake such costsif the market provided by the second exchange alternative to anestablished market in the product provided by the first exchange.However, such expenditures add to the cost of operating the market.

SUMMARY

According to one aspect of the invention, a method for settling a tradefor a product that has a physical delivery obligation associatedtherewith includes the step of recording in a database ownership by afirst trader of an authenticated delivery instrument, wherein thedelivery instrument is authenticated by a first exchange and theauthenticated delivery instrument can be used to redeem the product. Themethod also includes the step of electronically receiving an electronicproxy for the authenticated delivery instrument from a second exchange,wherein the electronic proxy may be exchanged for the authenticateddelivery instrument. Further, the method includes the steps of receivinga notification that the first trader wishes to settle a trade undertakenon the second exchange and electronically transferring the electronicproxy to an entity associated with a second trader, whereby ownership ofthe authenticated delivery instrument is transferred from the firsttrader to the second trader.

In another aspect of the invention, a computer-implemented system fortracking ownership of a product includes a first exchange interface thatelectronically communicates with a system operated at a first exchange,wherein the first exchange interface receives an electronicauthenticated delivery instrument authenticated by the first exchangeand that can be used to redeem the product. The computer-implementedsystem also includes a second exchange interface that electronicallycommunicates with a system operated at a second exchange, wherein thesecond exchange interface receives an electronic proxy for theelectronic authenticated delivery instrument and the electronic proxymay be exchanged for the electronic authenticated delivery instrument.In addition, the computer-implemented system includes a trader interfacethat receives a message from a first trader to make delivery of theproduct to a second trader, wherein the delivery is associated with atrade undertaken at the second exchange and a clearing firm interfacethat communicates with a clearing firm associated with the secondtrader, wherein the clearing firm interface transmits the electronicproxy to the clearing firm, whereby ownership of the authenticateddelivery instrument is transferred from the first trader to the secondtrader.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 shows a logical block diagram of obtaining a delivery instrumentand a proxy therefor.

FIG. 2 depicts a logical block diagram of a system and method ofsettling trades using the delivery instrument and proxy obtained in themanner depicted by FIG. 1.

FIG. 3 depicts logical block diagram of another system and method ofsettling trades using the deliver instrument and proxy obtained in themanner depicted by FIG. 1.

DETAILED DESCRIPTION OF THE DRAWINGS AND PRESENTLY PREFERRED EMBODIMENTS

FIG. 1 illustrates how a first trader 90, who is authorized to trade ata first exchange 102 and a second exchange 104, obtains a deliveryinstrument and a proxy therefor. In particular, the first trader 90deposits (shown by arrow 1) a quantity of a product at an issuer 106,wherein the deposited product underlies futures contracts that aretraded at the first exchange 102 and the second exchange 104. The issuer106 verifies that the deposited product meets the requirements for theproduct underlying the futures contract as specified by the firstexchange 102. The issuer 106 thereafter notifies the first exchange 102of the deposit (arrow 2) and issues a delivery instrument to a firstclearing firm 100 (arrow 3) where the first trader 90 has an account. Insome cases, the issuer 106 provides the delivery instrument to the firsttrader 90 who thereafter provides it to the first clearing firm 100. Thedelivery instrument may be a physical bearer receipt or an electronicreceipt. If the delivery instrument is an electronic receipt, the firstexchange 102 makes an entry in a database record associated with anaccount associated with the clearing firm 100 that indicates that thefirst trader 90 has deposited the quantity of product at the issuer 106.The first clearing firm 100 also makes an entry noting the deposit in anaccount associated with the first trader 90. If the first trader 90wishes to use the delivery instrument to fulfill delivery obligationsassociated with trade conducted at the first exchange 102, the firstclearing firm 100 presents the delivery instrument to the first exchange102 for authentication (arrow 5). The first exchange 102 verifies thatthe product represented by the delivery instrument meets therequirements defined in specifications established thereby and,typically, affixes an indicium to the delivery instrument that indicatesan authenticated delivery instrument. The first exchange 102 returns theauthenticated delivery instrument to the first clearing firm 100 (arrow6). The first trader 90 may use the delivery instrument to fulfilldelivery obligations associated with a sale of a futures contract at thefirst exchange 102.

In some cases, the first trader 90 may also be an issuer 106. Forexample, a grain facility or an energy producer may trade futurescontracts and also provide physical delivery of products for fulfillingdelivery obligations. In such cases, referring once again to FIG. 1, thefirst trader 90 provides the first clearing firm 100 with collateral asa guarantee that the first trader 90 is able to provide delivery of aquantity of a product (arrow 3). The first clearing firm 100 thereafterrequests authenticated delivery instruments from the first exchange 102(arrow 5) for the quantity of product guaranteed by the first trader 90.The first clearing firm 100 may maintain the collateral provided by theissuer 106 or send the collateral to the first exchange 102. The firstexchange 102 issues authenticated delivery instruments (arrow 6). Thefirst clearing firm 100 thereafter provides the authenticated deliveryinstruments to the second exchange 104 (arrow 7), which issues proxiestherefor (arrow 8). The collateral provided by the issuer 106 (that isalso the first trader 90) may be a letter of credit, an inventoryreport, or another indication that the issuer 106 is able to deliverproduct when necessary.

If the first trader 90 seeks to use the product deposited at the issuer106 to fulfill delivery obligations associated with trades of futurescontracts on either the first exchange 102 or the second exchanges 104,the first clearing firm 100 provides the delivery instrument to thesecond exchange 104 (arrow 7). Thereafter, the second exchange 104verifies the authenticity of the delivery instrument and issues a proxyfor the delivery instrument to the first clearing firm 100 (arrow 8).Typically, the proxy is an entry in a database record that is used totrack an account associated with the first clearing firm 100 at thesecond exchange 104 or at a clearinghouse. The database notation for theproxy typically comprises a digital signature or other authenticationdata that an exchange uses to authenticate the notation. In some cases,the first trader 90 may wish to make deliveries on trades conducted atthe first exchange 102 and at the second exchange 104 using the productpreviously deposited at the issuer 106. In such cases, the first trader90 provides the receipt associated with the previously deposited productto the first clearing firm 100, which then undertakes authenticating thereceipt and obtaining a proxy described in the foregoing.

FIG. 2 shows how a delivery obligation for the first trader 90associated with a sale of a futures contract on the second exchange 104is fulfilled. Specifically, suppose that the first trader 90 has sold afutures contract to a second trader 202 on the second exchange 104, forexample, by using an electronic platform provided by the second exchange104 or by participating in an open outcry auction. The first trader 90notifies the first clearing firm 100 associated therewith of a desire toinitiate delivery (arrow 1). The first clearing firm 100 notifies aclearinghouse 206 (arrow 2) that the first trader 90 seeks to initiatedelivery. The clearinghouse 206 notifies the first clearing firm 100 anda clearing firm 208 that is associated with the second trader 202 (i.e.,the buyer) with pertinent details regarding the delivery (arrows 4 a and4 b). Such pertinent details include the identities of the first andsecond clearing firms, 100 and 208 respectively, the quantity of theunderlying product to be delivered, and the amount of money to be paidfor the product. Typically, the amount of money that is paid for theproduct is the settlement price of the futures contract established onthe day the first trader 90 declares the intent to deliver. Thepertinent details may also include the location where the delivery is tooccur and a time by when delivery must be completed, The second clearingfirm 208 notifies the second trader 202 (arrow 5) that the first trader90 intends to deliver (arrow 5). The first clearing firm 100 thereafterforwards an invoice to the second clearing firm 208 (arrow 6) based onthe details provided by the clearinghouse 206. The second clearing firm208 sends payment for the amount due per the invoice to the firstclearing firm 100 (arrow 7). The payment may be in the form of a bankdraft, a certified check, an electronic transfer of funds, or anotherpayment instrument the first clearing firm 100 is able to accept. Afterreceiving the payment, the first clearing firm 100 sends a request tothe second exchange 104 that the proxy for the delivery instrument betransferred to the second clearing firm 208 (arrow 8). Specifically, thefirst clearing firm 100 generates a message that includes the proxy dataand information identifying the trade being settled and sends themessage to the second exchange 104. The first clearing firm 100thereafter adjusts the account of the first trader 90 to indicate thetransfer of the product represented by the proxy. The second exchange104 validates the messages sent by the first clearing firm 100 anddeletes the entry associated with the proxy in an account associatedwith the first clearing firm 100 and creates an entry for the proxy inan account associated with the second clearing firm 208. The secondexchange 104 then sends a message to the second clearing firm 208notifying the second clearing firm 208 that ownership of the proxy hasbeen transferred (arrow 9) and that delivery obligations of the firsttrader 90 and the second trader 202 have been fulfilled. In someembodiments, the first clearing firm 100 does not wait for the paymentto be received from the second clearing firm 208 before sending therequest to the second exchange 104 that the proxy be transferred to thesecond clearing firm 208. In some cases, the first clearing firm 100sends the message to the second exchange 104 requesting the transfer ofthe proxy before the second firm 208 provides payment. In other cases,the first clearing firm 100 sends the request for the transfer of theproxy and the second clearing firm 208 provides payment concurrently. Insome embodiments, a system at the second exchange 104 monitors theactivity between the clearinghouse 206 and the first and second clearinghouses, 100 and 208, respectively, and automatically initiates thetransfer of the proxy. As noted above, typically, the communicationsbetween the entities that participate in the delivery process aretransmissions of messages between systems operated between suchentities. In some cases, a staff member at one entity may communicatedirectly with a staff member at another entity to facilitate thedelivery process. In addition, a staff member at an entity may instructa system at the entity to send a message to a system at another entity.

Upon receiving the message from the second exchange 104 that the proxyhas been transferred, the second clearing firm 208 creates, in adatabase thereof, an entry in a record that is associated with thesecond trader 202 that indicates that the second trader 202 owns theunderlying product associated with the proxy. Typically, theclearinghouse 206 operates systems that track the accounts of clearingfirms and clearing firms operate system that track accounts of tradersassociated therewith. Further, a clearing firm communicates with otherclearing firms, exchanges, and clearinghouses on behalf of tradersassociated with the clearing firm.

Once the entry for the proxy has been made to the account of the secondtrader 202, the second trader may use the proxy to effectuate deliveryon an obligation due to another trade made by the second trader 202. Ifthe second trader 202 seeks to obtain possession of the good representedby the electronic proxy, the second trader 202 notifies the secondclearing firm 208 (arrow 11) of the need for physical delivery. Thesecond clearing firm generates and sends a message to the secondexchange 104 (arrow 12) notifying the second exchange 104 that thesecond trader 202 seeks physical delivery. The second exchange 104 sendsa message to the issuer 106 to provide physical delivery to the secondtrader 202 (arrow 13). Thereafter second trader 202, or a representativethereof, may claim the physically delivery from the issuer 106 of theproduct represented by the proxy (arrow 14). The issuer notifies thesecond exchange 104 that the underlying good has been transferred to thesecond trader (arrow 15), and the second exchange 104 nullifies theproxy associated with the underlying good and the delivery instrumentrepresented by the proxy.

FIG. 3 shows how the first trader 90 may use the proxy obtained from thesecond exchange 104 to deliver on an obligation associated with a trademade with the second trader 202 on the first exchange 102. Inparticular, the first trader 90 notifies the first clearing firm 100 ofa desire to initiate delivery (arrow 1). The first clearing firm 100notifies the clearinghouse 206 (arrow 2) that the first trader 90 seeksto initiate delivery. The clearinghouse 206 notifies the first clearingfirm 100 and the clearing firm 208 with pertinent details regarding thedelivery (arrows 4 a and 4 b) as described hereinabove. The secondclearing firm 208 notifies the second trader 202 (arrow 5) that thefirst trader 90 intends to deliver. The first clearing firm 100thereafter forwards an invoice to the second clearing firm 208 (arrow 6)based on the amount to be paid as provided by the clearinghouse 206. Thesecond clearing firm 208 then pays the amount due per the invoice to thefirst clearing firm 100 (arrow 7). Upon receiving payment, the firstclearing firm 100 sends a request to the second exchange 104 that theproxy for the underlying product be converted into a delivery instrument(arrow 8). The second exchange 104 provides the delivery instrumentassociated with the proxy to the first clearing firm 100 (arrow 9). Insome embodiments, the delivery instrument is the delivery instrumentthat the first clearing firm 100 provided to the second exchange 104 (atarrow 7 of FIG. 1) to obtain the proxy (at arrow 8 of FIG. 1). In otherembodiments, the delivery instrument is equivalent to or fungible withthe delivery instrument that the first clearing firm 100 provided to thesecond exchange 104 (at arrow 7 of FIG. 1) to obtain the proxy (at arrow8 of FIG. 1). Referring once again to FIG. 3, the second exchange 104adjusts the account of the first clearing firm 100 to indicate that theproxy has been replaced by the delivery instrument and nullifies theproxy. The first clearing firm 100 provides the delivery instrument tothe second clearing firm 208 (arrow 10). If the delivery instrument isan electronic delivery instrument then the first clearing firm 100generates and transmits a message to the second clearing firm 208 thatrequests the transfer of the electronic delivery instrument. If thedelivery instrument is a paper bearer receipt or another physicaldelivery instrument, the first clearing firm 100 typically couriers thedelivery instrument to the second clearing firm 208. The second clearingfirm makes an entry in the account of the second trader 202 that thesecond trader 202 owns the underlying product associated with thedelivery instrument.

If the second trader 202 wishes to take physical possession of theproduct associated with the delivery instrument and if the deliveryinstrument is a paper bearer receipt or equivalent, the second clearingfirm 208 sends the delivery instrument to the second trader 202 (arrow11). The second trader 202 thereafter surrenders the delivery instrumentto the issuer 106 (arrow 12) and, in exchange, the issuer 106 providesthe underlying product to the second trader 202 (arrow 13). In someembodiments, the second clearing firm 208 sends either a physicaldelivery instrument or an electronic delivery instrument to the issuer106 (arrow 14) directly with identifying information about the secondtrader 202. The second trader 202, or a representative thereof, maythereafter appear at the issuer 106 to take possession of the productrepresented by the delivery instrument.

Referring once again to FIG. 1, in some embodiments, the first trader 90sends the delivery instrument to a registrar (not shown) instead of thesecond exchange 104 and the registrar issues the proxy. In suchembodiments, the registrar, instead of an exchange, validates the proxyand exchanges the proxy with a delivery instrument as described in FIGS.2 and 3. Typically, the registrar is affiliated with the second exchange104, the issuer 106, and/or the clearinghouse 206.

When the registrar receives the original delivery instrument and issuesthe electronic proxy, notations are made on the appropriate clearingfirm's account. When a clearing firm wishes to receive either anelectronic or paper delivery instrument in exchange for the electronicproxy, the clearing firm returns the electronic proxy to the registrar.The registrar issues the delivery instrument, cancels the proxy, andmakes the appropriate notations within the clearing firm's account. Theregistrar maintains the original delivery instruments that aredeposited, and exchanges the original delivery instruments forelectronic proxies, and redistributes the delivery instruments when theelectronic proxies are turned in.

Although the use of a delivery instrument and a proxy therefor aredescribed in connection with delivery obligations associated with afutures contract, it should be apparent such delivery instruments andproxies may be used for deliveries associated with any other type ofcontractual obligation including over-the-counter (cash) trades,currency, foreign exchange, securities, equities, energy, generalcommodities, etc.

Numerous modifications to the present invention will be apparent tothose skilled in the art in view of the foregoing description.Accordingly, this description is to be construed as illustrative onlyand is presented for the purpose of enabling those skilled in the art tomake and use the invention and to teach the best mode of carrying outsame. The exclusive rights to all modifications which come within thescope of the appended claims are reserved.

I claim:
 1. A computer-implemented system for tracking ownership of aproduct, the system comprising: a first exchange interface operative toreceive an electronic authenticated delivery instrument authenticated bya first exchange, wherein the electronic authenticated deliveryinstrument can be used to redeem the product; a second exchangeinterface operative to receive an electronic proxy for the electronicauthenticated delivery instrument, wherein the electronic proxy may beexchanged for the electronic authenticated delivery instrument; a traderinterface operative to receive a message from a first trader to makedelivery of the product to a second trader, wherein the delivery isassociated with a trade undertaken at a second exchange in communicationwith the second exchange interface; and a clearing firm interfaceoperative to transmit the electronic proxy to a clearing firm incommunication with the clearing firm interface, whereby ownership of theauthenticated delivery instrument is transferred from the first traderto the second trader.
 2. The computer-implemented system of claim 1,wherein the authenticated delivery instrument is a receipt.
 3. Thecomputer-implemented system of claim 2, wherein the receipt is an entryin a database record associated with a clearing firm.
 4. Thecomputer-implemented system of claim 3, wherein the receipt iselectronically authenticated.
 5. The computer-implemented system ofclaim 1, wherein the authenticated delivery instrument may be used todeliver the product only for trades undertaken at the first exchange. 6.The computer-implemented system of claim 1, wherein the authenticateddelivery instrument is a shipping certificate.
 7. Thecomputer-implemented system of claim 1, wherein the second exchangeinterface transmits a request to the system operated by the secondexchange to verify that a product meets predetermined specifications. 8.The computer-implemented system of claim 7, wherein the second exchangeinterface receives from the system operated by the second exchangeverification that the product meets the predetermined specifications. 9.The computer-implemented system of claim 1, wherein the trade undertakenat the second exchange comprises a trade of a futures contract.
 10. Thecomputer-implemented system of claim 1, wherein the trade undertaken atthe second exchange comprises a cash trade.
 11. A computer implementedmethod of settling trades for product having a physical deliveryobligation, the method comprising: electronically providing anauthenticated delivery instrument authenticated by a first exchangewhich may be used to settle a trade undertaken on the first exchange andcan be used to redeem the product; electronically issuing a proxy forthe authenticated delivery instrument, wherein the proxy may beexchanged for the authenticated delivery instrument; and electronicallyreceiving the proxy to settle a trade undertaken on a second exchange.12. The computer implemented method of claim 11, wherein theauthenticated delivery instrument is a receipt.
 13. The computerimplemented method of claim 12, wherein the receipt is an entry in adatabase record associated with a clearing firm.
 14. The computerimplemented method of claim 12, wherein the receipt is electronicallyauthenticated.
 15. The computer implemented method of claim 12, whereinthe receipt includes authentication information corresponding to anexchange.
 16. The computer implemented method of claim 15, whereinreceipt may be used to settle trades only at the exchange associatedwith the authentication information.
 17. The computer implemented methodof claim 11, wherein the authenticated delivery instrument is a shippingcertificate.
 18. The computer implemented method of claim 11, whereinthe step of electronically issuing the proxy comprises the step ofelectronically redeeming the proxy for the authenticated deliveryinstrument.
 19. The computer implemented method of claim 11, whereinstep of electronically providing an authenticated delivery instrumentcomprises the step of verifying that an underlying product meetspredetermined specifications.
 20. The computer implemented method ofclaim 11 further comprising undertaking a trade.
 21. The computerimplemented method of claim 20, wherein the undertaking the tradecomprises trading a futures contract.
 22. The computer implementedmethod of claim 20, wherein the undertaking the trade further comprisesundertaking a cash trade.
 23. A computer-implemented method for trackingownership of a product, the method comprising: receiving from a secondexchange an electronic proxy for an electronic authenticated deliveryinstrument held by a first exchange, wherein the electronic proxy may beexchanged for the electronic authenticated delivery instrument which canbe used to redeem the product; receiving a message from a first traderto make delivery of the product to a second trader, wherein the deliveryis associated with a trade undertaken at the second exchange; andtransmitting the electronic proxy to a clearing firm associated with thesecond trader, whereby ownership of the authenticated deliveryinstrument is transferred from the first trader to the second trader.